CERC: DISCOMs to Pay Reduced Late Payment Surcharge Amid COVID-19 Outbreak

The revised rate is applicable on payment due dates falling between March 24 and June 30, 2020


Given the ongoing lockdown in the country caused by Coronavirus (COVID-19), the Central Electricity of Regulatory Commission (CERC) has reduced the rate for late payment surcharge (LPS) payable by distribution companies (DISCOMs) power generators. The LPS is now reduced to 12% per annum from the earlier 18% if the due date falls between March 24, 2020, and June 30, 2020.

According to the CERC, if there’s any delay in the payment to the generating companies (GENCOs) and inter-state transmission licensees beyond 45 days from the date of presentation of the bills (between March 24, 2020, and June 30, 2020), then the DISCOMs can make the payment of LPS at a reduced rate of 1% per month instead of 1.5%.

The order noted that the late payment surcharge should not be more than the cost that the generating companies or transmission licensees would have to bear because of the delayed payment.

However, the Commission has clarified that if the presentation of the bill by the generating companies or inter-state transmission licensees falls before March 24, 2020, or after June 30, 2020, then the DISCOM is liable to pay the LPS as per Regulation 59 of the 2019 Tariff Regulations.

Meanwhile, the beneficiaries of the generating stations and long-term customers of the inter-state transmission systems will continue to enjoy the rebates if the payments are made to the GENCOs and transmission licensees within the timeline specified in the regulations.

For projects where the tariff is determined through competitive bidding, relief on the LPS delayed for more than 45 days (falling from March 24, 2020, to June 20, 2020) can be claimed under force majeure provision of the power purchase agreements (PPAs).

Similarly, in case of the inter-state transmission licensees, LPS will be treated as per the provision of Transmission Service Agreements (TSAs) along with the CERC’s Sharing of Transmission Charges and Losses-Regulations, 2020.

On March 28, 2020, the Ministry of Power (MoP) issued a direction to the CERC regarding the late payment surcharge to be charged by the generating companies and transmission licensees on account of severe restrictions placed on the movement of people and establishments.

The Ministry had said that the Commission may specify a reduced rate of LPS, which is delayed beyond a period of 45 days (from the date of the presentation of the bill) from March 24, 2020, to June 30, 2020, to generating companies and licensees. The LPS will be applicable for delayed payments until June 30, 2020, and the surcharge should not be more than the cost the generating companies or transmission licensees would have to bear because of the delayed payment, as previously reported by Mercom.

The CERC also added that the generating companies and inter-state transmission could opt for a moratorium on payment of installments of term loan and defer the payment of interest for the period between March 1, 2020, to May 31, 2020, but the interest accrued will not be waived. So, the generating companies and the transmission licensees will have to incur the cost of working capital facilities even during the deferment period.

The CERC has also ordered that the generating companies and inter-state transmission licensees regulated by this Commission will be required to continue to discharge their debt service obligations and arrange for working capital for the day-to-day operation of their generating stations and transmission assets.

The Reserve Bank of India (RBI) responding to the unprecedented situation due to the outbreak of Coronavirus announced that all commercial banks, financial institutions, and Non-Banking Financial Companies (NBFCs) can now allow a moratorium of three months on payment of the installments for all term loans, which are outstanding as on March 1, 2020. Also, if working capital facilities have been approved in the form of cash credit or overdraft, then lending institutions can allow deferment of three months on payment of interest of all facilities outstanding as on March 1, 2020.

Coronavirus pandemic is proving to be the solar industry’s biggest challenge this year, and the repercussions are being felt across industries all over the globe. Track the latest developments and initiatives taken by the government to fight the economic repercussions of the pandemic in the renewable industry here.

Anjana is a news editor at Mercom India. Before joining Mercom, she held roles of senior editor, district correspondent, and sub-editor for The Times of India, Biospectrum and The Sunday Guardian. Before that, she worked at the Deccan Herald and the Asianlite as chief sub-editor and news editor. She has also contributed to The Quint, Hindustan Times, The New Indian Express, Reader’s Digest (UK edition), IndiaSe (Singapore-based magazine) and Asiaville. Anjana holds a Master’s degree in Geography from North Bengal University, and a diploma in mass communication and journalism from Guru Ghasidas University, Bhopal.